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PEER COMPANIES

MUMBAI: Stock markets which have seen one of the strongest rallies in the past three years may have already factored in a victory for Narendra Modi-led Bharatiya Janata Party (BJP) in the ongoing elections. Traders and investors may soon look for other drivers to keep the momentum going as a sub-normal monsoon threatens to spoil the market party even if the BJP comes to power.

"Modi-led government is more or less a certainty now and nobody is expecting any surprises on May 16 (election results day)," said Raamdeo Agrawal, joint MD and co-founder, Motilal Oswal. "Cues will come from other ground realities now."

Traders' scepticism about the market prospects was seen on Friday after they cut their positions ahead of the weekend, resulting in benchmark indices dropping 0.8% in the second half of the trading session. The Sensex fell 188 points to close at 22,688 and the Nifty index was down 58 points at 6,782. ITC fell 2.76% to Rs 343. NTPC fell 2.74% to Rs 118 and Hindustan Unilever was down 2.58% to Rs 580. Top private sector bank ICICI Bank fell 2.29% to Rs 1,269 and index major Reliance Industries declined 2.01% to Rs 947.

"Institutional investors are apprehensive of the degree of speculation on number of seats that the NDA may get," said Saurabh Mukherjea, CEO, Institutional Equities, Ambit Group... With Modi already factored in, there could even be a small pullback in markets, post May 16 but no major correction."

Polling in a total of 349 Lok Sabha constituencies was completed by the end of the sixth phase of general election on Thursday with 66% votes. The total registered voter turnout for the same seats during 2009 Lok Sabha election was 57.53%, which marks an increase of 7.5%. Analysts pointed out that a higher voter turnout was a possible indication of an anti-incumbency vote.

Mukherjea is of the view that phenomenal returns could be made in India's stock markets in the next two years. "Markets have given an average 27% return in two years immediately post elections on eight out of nine occasions in the past years. In fact, 80% of India's market returns have come in the two years preceding elections and investors will look for further cues," said Mukherjea.

Experts said that if the NDA alone in its current form crosses the magical figure of 272, which is doubtful, then the markets could give yet another major bounce.

The benchmark index, BSE Sensex, and National Stock Exchange Nifty had gained 16% since September last, post Modi's elevation as Bhartiya Janata Party's prime ministerial candidate. Last week, the indices rose for three continuous sessions to touch new life-time highs.

"Traders have started looking at other cues for markets now," said Sudip Bandyopadhyay, MD & CEO, Destimoney Securities.

"Post May 16, there could be a small bounce depending on the number of seats the NDA gets but after that a pullback is likely."

Investors worry a sub-normal monsoon would scuttle the new government's attempts to revive the economy as a drop in inflation would be a key trigger for the Reserve Bank of India to cut interest rates. Barring realty, consumer durables, healthcare and TECk, all other BSE sectoral indices ended in the red.

Among them, oil & gas, FMCG, capital goods and power indices fell the most by 2.11%, 2.02%, 1.34% and 1.06%, respectively.